April 21 (Reuters) – Buyers representing greater than 4.5 billion Swiss francs ($5 billion) of Credit score Suisse (CSGN.S) bonds have sued the Swiss regulator after their investments had been worn out throughout final month’s government-orchestrated rescue.
Legislation agency Quinn Emanuel Urquhart & Sullivan, which is representing the bondholders, mentioned on Friday the transfer was step one in a battle to hunt redress for shoppers whose belongings it mentioned had been expropriated throughout Credit score Suisse’s takeover by greater rival UBS (UBSG.S).
It’s the first main lawsuit within the public area over the Swiss resolution to render round $18 billion of Credit score Suisse’s Extra Tier 1 (AT1) debt nugatory through the 3 billion Swiss franc all-share rescue deal final month, which shocked markets and alerted litigators.
“We’re dedicated to rectifying this resolution, which isn’t solely within the pursuits of our shoppers however can even strengthen Switzerland’s place as a key jurisdiction within the international monetary system,” mentioned Thomas Werlen, Quinn Emanuel’s Swiss managing accomplice.
Swiss regulator FINMA (Monetary Market Supervisory Authority), which made the write-down order throughout weekend disaster talks in March after a hunch within the worth of shares and bonds intensified fears a few international banking disaster, declined to remark. Credit score Suisse additionally declined to remark.
Peter Viktor Kunz, a professor of enterprise regulation on the College of Bern, mentioned it will be a catastrophe for FINMA and Switzerland’s fame as a monetary centre if the regulator misplaced the case.
“The fame of the nation as a steady place for traders is on the road,” he mentioned.
The case was filed on April 18 within the Federal Administrative Court docket in St Gallen, north east Switzerland.
‘VIABILITY EVENT’
FINMA mentioned final month that its resolution to impose steep losses on some bondholders was legally watertight as a result of the bond prospectuses and emergency authorities laws allowed for a complete write-down in a “viability occasion”.
Engineered within the wake of the worldwide monetary disaster, AT1 bonds had been designed to make sure traders, not taxpayers, carry the burden of threat if a financial institution runs into bother.
Bondholders have been searching for authorized recommendation for the reason that rescue upended a long-established observe of prioritising bondholders over shareholders in a debt restoration, and a variety of claims have already been filed in Switzerland over the phrases of the deal.
The Federal Administrative Court docket mentioned it was nonetheless receiving complaints, however declined to call claimants or touch upon what number of had been lodged by bondholders or their legal professionals.
Some traders have been buying and selling the notes at penny costs in a so-called litigation play, betting that profitable authorized claims will enhance values sooner or later, legal professionals have mentioned.
($1 = 0.8941 Swiss francs)
Reporting by Jahnavi Nidumolu in Bengaluru; Modifying by Savio D’Souza
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